Think about what conditions would need to be true for housing to be a bad investment.

>I feel strongly housing is a basic human right, and so we should stop viewing residential property as an appreciating asset.

Its not about "views", it is about reality. You cant simply wish an alternative into existence by closing your eyes.

The most simple of all - It goes down in price.

I mean yes, of course, tautologically.

But can you at least attempt to explain how something that has a lot of value and can last for centuries, is realistically going to go down in price given inflation?

In general the only scenario where housing can go down in value is if the area/city is decaying. But then you don't want to live there so that's not a useful solution.

This can be done by changing who is even allowed to own them, and what they're allowed to do with them. Make it unbelievably unattractive to have "investment properties" - massive taxes, extremely high interest rates, very restrictive rental laws, and all of them go up by an order of magnitude for each successive residential property owned.

So now suddenly nobody (especially not corporations) want to actually own residential property for the purpose of making money. It won't be a good place to put money, because it doesn't make money in the same way bonds or the stock market will. So now demand has gone WAAAAY down. And then prices come down, because the only people who really do want to buy residential property are people that need a place to live, not people (or companies) looking to make a profit from that property.

We wouldn't let a couple of private companies buy all the drinking water or air and then sell it back to us for the purpose of making a profit. Those are as essential to a good life as a place to live.

Obviously rich people, and people (and companies) making profit from residential property don't like this idea. But we need to provide people a place to live, not companies a way to make profit.

And how would you implement that?

So basically there needs to be a government agency which tracks the inflation adjusted price of your home. Ok that's easy. But this agency now also must have the power to prohibit you from selling your home for any price other than their official inflation-adjusted price. If they don't have this power, then someone could offer you more for your home and thus you made a profit, and your goal fails.

Would you expect to have voter support for such a price fixing scheme from any side of the aisle? Would you even want to live in such a world?

I keep asking because often these threads go into something like "Oh you just stop making homes an investment and problem solved.", but that word "just" is moving some pretty big mountains there. If you drill down on what that really might mean, it never comes out to something realistic to implement.

> So now demand has gone WAAAAY down.

Demand does not go down. Your scheme just favors owners living in their home as opposed to corporations buying them to rent them out (which I fully and enthusiastically support!). But actual number of homes and actual number of families wanting to live in them didn't change, so demand didn't change.

> We wouldn't let a couple of private companies buy all the drinking water

(Off topic to this thread but this is happening, scarily enough.)

Only humans can buy residential property, and only one residential property for one human.

>Demand does not go down. Your scheme just favors owners living in their home as opposed to corporations buying them to rent them out (which I fully and enthusiastically support!). But actual number of homes and actual number of families wanting to live in them didn't change, so demand didn't change.

Number of entities that want to purchase residential property has now gone WAY down. No corporations, nobody owning multiples. There are not more homes total, and there are not less people needing a place to live, but there are less entities trying to buy homes.

The price WILL go down.

It doesnt account for renters, it doesnt account for down payments, and it doesnt account for the cost of new construction.

There wont be anywhere for people with no down payment and no credit to rent, and new housing wont be built.

When pressed on this, people in the past have resorted to the idea that then the government will provide low income rental market.

Maybe humans are allowed to own some maximum number of properties for the purposes of renting it out, and that number will decrease over time.

Maybe banks can own houses and rent them out at some capped amount.

Maybe the government can own houses and rent them out with the express purpose of "rent to own", with absolutely no intention of "earning a profit".

I don't have all the answers, but I think it's pretty clear that companies owning 40% of ALL residental homes in a city and making massive profit renting them out does not make housing affordable, and it does not allow people to have their basic human needs met. Therefore something needs to change.

There is also a fundamental tension between forces driving people into dense urban apartments and the desire for home ownership. When you look at dense European cities, virtually nobody owns their flat.

Overall, Im not opposed to banning mega investors, but think it will just make more opportunity for small scale rental companies. This reference [2], talks about some of the laws proposed in California, but also has a lot of valuable context.

https://www.brookings.edu/wp-content/uploads/2023/11/2023110...

https://calmatters.org/housing/2024/03/institutional-investo...

https://www.washingtonpost.com/business/interactive/2022/hou...

https://247wallst.com/special-report/2022/06/05/cities-where...

https://www.redfin.com/news/investor-home-purchases-q4-2023/

(There was an article here on HN a couple of months back that was "Investors own 40% of homes in <some city>" - I can't find it now.

The 2-3% number is comprehensive nationwide data.

No assets directly produce cashflow, whether they are factories, tractors, or tools.

Assets can just hold their real value compared to inflation and that's useful enough - even losing value slower than inflation is still good.

“A present right of an entity to an economic benefit”.

“Essential to the definition of an asset is a right to an "economic benefit" —the capacity to provide services or benefits to the entities that use them. Generally, in a business entity, that economic benefit eventually results in potential net cash inflows to the entity. In a not-for-profit entity, that economic benefit is used to provide desired or needed goods or services to beneficiaries or other constituents, which may or may not directly result in net cash inflows to the entity.“

It also says “incurring a cost to acquire an item does not in itself qualify an item to meet the definition of the asset”

https://www.fasb.org/Page/ShowPdf?path=Concepts_Statement_8-...

Anyways, even by your book's definition - later sale for a higher price is economic benefit, protection against inflation is one too.

This link considers your viewpoint too: https://www.investopedia.com/terms/a/asset.asp

I'm not an accountant either but my company has some assets we paid for with a loan, so this is a situation I know.

No, the property is your asset. The mortgage is your liability. Each month as you pay the mortgage you have an expense (the interest part of the mortgage) and a reduction in your liability.

A store that owns its own real estate isnt generating cashflow with it. This is the equivalent to a Homeowner living in a home.

If you are deadset on using intangible assets, it is the same a company holding a drug patent and producing the drug. Cashflow comes from sales, not the patent.

A house is an asset if you have a renter in it or not. It can also be utilized to generate income.

This is one of those meme-phrases that no longer really means anything.

> Policymakers simply have to decide if they cater to those that already own homes, or those desperately wanting to buy one.

What exactly would you propose this means?

A house is always going to appreciate over the long haul on average, simply due to inflation. Are you proposing policymakers should decide to make inflation go away? (If it were so simple to accomplish that!)

It means exactly what it says it means. You can either making residential housing something that regular people earning regular salaries can afford to purchase, or you make it a vehicle for investment to grow money, so that rich people, and companies and brokerages and all the rest want to park their money there so that it will grow rapidly.

> What exactly would you propose this means?

Policymakers could decide to implement laws to limit how much of an "investment" housing can be. Obvious choices are limiting houses to only be owned by humans, limiting how many each human can have and penalties (tax or otherwise) for trying to "make money" from owning residential housing.

> A house is always going to appreciate over the long haul on average, simply due to inflation.

Residential property appreciates WAY faster than inflation. Since covid most Canadian houses are up at least 50%.

Has inflation been at 50% during that time?

How, exactly?

> Obvious choices are limiting houses to only be owned by humans, limiting how many each human can have

These are great and I fully support such rules. They will not make houses depreciate though. They'll make more of them owned by regular people instead of rental conglomerates, which is a wonderful outcome. But it won't make them depreciate.

> penalties (tax or otherwise) for trying to "make money" from owning residential housing

You make money from owning housing merely by owning and living in it. How are you looking to punish homeowners?

So there are cities in the US where 40% of all residential properties are owned by investment firms. Now they can't own them. So they sell them. Now you have a LOT of residential properties on the market, and a lot less entities that are legally allowed to purchase them than before. Of course prices will come down.

It's an interesting thought experiment, I'm not sure what the outcome would be.

In the real world we also have a lot of people who want to rent, so someone else needs to own those rental properties. But for the sake of a thought experiment, let's ignore that part.

There's a town with 1000 houses and 1000 families. 500 families own their house, the other 500 are owned by MegaCorp who rents them to the remaining 500 families (who'd prefer to buy but can't).

If MegaCorp is ordered to sell all their 500 houses overnight, I agree prices will drop. Because not every one of those 500 renting families will be ready to buy overnight, it means the ones who do can negotiate down on price. But that's not how divestitures are usually done, precisely due to this shock to the market.

If MegaCorp is ordered to sell one house per month until all are sold, I suspect prices go up a bit. Because even though the buyers know every house will eventually be sold, it's going to take 500 months so many would rather get in earlier so they'll be bidding against each other, rising prices in the early years of this program.

My main point is that "a lot less entities that are legally allowed to purchase them" is not that important. Because MegaCorp is a pass-through entity, they don't occupy a house, they just want the income stream from it. Ultimately it is still occupied by a family, whether by direct purchase or via renting. So removing MegaCorp from the picture does not reduce demand, there's still 1000 houses and a 1000 families. (It does remove their profiteering from renting, so that part is still a win.)

Of course, reality is more complex since there are renters who want to rent as well as families moving both into and away from this town, so modeling this precisely is too much work for a HN comment.